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Optimism for the future of sourcing November 23, 2011

Posted by Mark Hillary in IT Services, Outsourcing.
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There has been an air of optimism in the IT service provider community recently, quite at odds with what we all read in the press on a day-to-day basis. It seems that there is still a lot of work to be done in the international outsourcing community.

Partly, this is driven by the global nature of the market. Economies such as China and Brazil are becoming huge consumer cultures and growth there is creating a need downstream for more and more IT services – to support the retailers, logistics firms, and other industry sectors all experiencing strong growth.

But this optimism remains tempered by a sense of foreboding, that the IT services industry has to change if it is to grow and succeed in the long term. There is an emergence of some important new markets, being driven by what might be termed ‘mega-trends’ in society – trends that go beyond the geographic alone.

While some service firms can only hope for a recovery in retail or banking, it’s going to be these mega-trends that really shape the future of the industry.

First, the ageing population in developed ‘western’ societies. By the middle of this century it is estimated that fewer than half of all Germans will be economically active. The majority will be either elderly or children, neither contributing to government finances. So how can a developed country like Germany continue to expect economic growth at the same time as maintaining the existing social welfare standards – all with fewer people working and contributing to the economic welfare of the nation?

Second, sustainability is back on the agenda. European governments have been implementing a system of carbon reduction commitments that will force companies to audit and reduce their carbon use. This push from government will change corporate culture across the entire European region – and beyond.

Third, international terrorism is not going away just yet. We need better security systems that are smarter, and yet still affordable.

These three major trends are going to change the shape of IT services in future. But how many executives on the buy or sell side of the outsourcing equation have considered just how much their own marketplace might change this coming century?

Madrid 11 M

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